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Political Stalemate Affects South Korean Property Tax Breaks

by Mary Swire, Tax-News.com, Hong Kong

06 December 2013


The bills to give effect to the South Korean Government's measures, announced In April and August this year, to cut taxes on home purchases in order to encourage a revitalization of the housing market, have been stalled, along with a number of other bills, in the National Assembly, due to a continuing stand-off with the parliamentary opposition.

With continued global economic uncertainty and the country's property market remaining subdued, a capital gains tax exemption on buyers of homes valued at less than KRW900m (USD850,000) was maintained for all of 2013 in April, while, in August, a cut in property acquisition tax to 1 percent, from 2 percent, was reinstated on homes valued at less than KRW600m.

In addition, while the acquisition tax on the purchase of homes valued at between KRW600m and KRW900m would remain unchanged at 2 percent, the tax on those over KRW900m was reduced to 3 percent from the current 4 percent.

However, with all tax measures requiring parliamentary approval, the policies have been caught up in the lack of bills currently being passed, including the Government's 2014 Budget and its 2013 Tax Revision Bill.

For example, the latter contains individual income tax reductions for those on lower incomes, a lower business turnover ceiling to benefit from the research and development tax credit, and improved tax deductions for depreciable asset investments by small and medium-sized enterprises. Those tax measures would, Hyun confirmed, be lost if the Tax Revision Bill was not approved by the end of 2013.

He expressed his concerns about "a possible delay in the country's economic recovery, owing to the late passage of the bills, and asked for cooperation from the political community."

A comprehensive report in our Intelligence Report series dealing with the issues raised by international property investment, and the possible taxation implications raised by such purchases, with an account of the likely (and some less obvious) potential countries for your consideration, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report15.asp
TAGS: capital gains tax (CGT) | tax | business | property tax | real-estate | tax rates | Korea, South | tax breaks | individual income tax | research and development | Tax

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